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Trade and diplomacy Economic determinants of international cooperation agreements and its effect on international trade in the post World War II era: 1945-2022

Author

Listed:
  • Antoni Estevadeordal

    (GU - Georgetown University [Washington], Institut Barcelona d’Estudis Internacionals)

  • Gaston Nievas

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract

We study the determinants of international cooperation and its effect on trade. We rely on a unique database of 31,982 International Cooperation Agreements (ICAs) signed between 1945-2022 by 193 countries. Estimating bilateral gravity equations, we find that trade follows the flag: ICAs increase bilateral exports by around 1-3%, with stronger effects for South-South relations. We address potential endogeneity through panel approach and an instrumental variable that exploits the network structure of international relations. Further, using LPM we find that gravity forces explain country pairs entering an ICA. Importantly, we find that ICAs serve as stepping stones towards Regional Trade Agreements, confirming a previous step in Balassa (1961) theory of economic integration. Our results shed new light on the international relations-trade nexus and contribute to the current debate on friendshoring.

Suggested Citation

  • Antoni Estevadeordal & Gaston Nievas, 2024. "Trade and diplomacy Economic determinants of international cooperation agreements and its effect on international trade in the post World War II era: 1945-2022," PSE Working Papers halshs-04721902, HAL.
    • Handle: RePEc:hal:psewpa:halshs-04721902
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-04721902v2
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    Keywords

    International cooperation agreements; International trade flows; Regional trade agreements; Gravity equation;
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